The crypto asset ecosystem has expanded rapidly in recent years, and there have been calls for additional regulation in Australia to both support consumer confidence and provide regulatory certainty to crypto businesses and service providers.
Recent events and extreme fluctuations in the crypto asset market highlight the risks involved for investors and participants. While this consultation and submission focus on the regulation of crypto asset secondary service providers (CASSPrs), we note that this on its own will not mitigate all risks to consumers. Other factors, including the volatility of assets themselves, can also present risks.
The crypto ecosystem is extensive and rapidly changing, and there are many varied players involved. KPMG considers that in order to develop an appropriate regulatory framework, it is critical to undertake a classification exercise in order to better understand the different categories of crypto assets and the type of regulation required for each.
In this submission KPMG supports the development of a single definition for crypto assets and encourages alignment with other international definitions such those used by the Financial Action Task Force and/or the OECD. KPMG recommends a token mapping exercise be undertaken, developed, and be used to inform the application and relevance of specific proposed obligations on CASSPrs.
KPMG also recommends that the proposed regulatory regime adopt a uniform and consistent regulatory framework to safeguard private keys.
This submission outlines seven recommendations at section one and addresses the consultation questions at section two.
KPMG looks forward to continued engagement with the Treasury as it develops a regulatory framework in this area.